2024 & 2025 has a bunch of tax changes that you need to understand! By understanding these updates, you’ll maximize your tax savings and keep more in your pocket! I’ll break down the primary changes in simple form.
TFSA contributions and limits
- Annual contribution room increased to $7,000 per year
- Since inception, the total room is now $102,000
- The Catch – penalties for misuse are substantial – this is very manageable
FHSA is Key (First Home Savings Account)
- Allowed investment of $8,000 per year for a maximum of $40,000
- Gives you a full deduction just like an RRSP
- If you don’t use it, then you can transfer it into your RRSP
- This should be the biggest priority for new potential homeowners!
RRSP contributions and limits
- Grows by 18% of your income
- In 2025 is if $32,490 (over $180K earned income)
- RRSP’s are perfect for individuals who:
o Are looking for long term planning
o Do not have another pension to rely on
o Want to reduce their higher income years
RRSP Homebuyer plan
- You can now withdraw up to $60,000 starting this year
- The start of the repayment has also increased from 2 years to 5 years
- The Catch – you do need to repay this over time, or it gets included in your income
Taxed more, taxed less…
CPP deductions are increasing
- Maximum limit is $4,430
- CPP maxes out at $81,200
- The contributions double for self-employed
- Don’t rely on CPP for retirement – look at the TFSA and / or RRSP Income
Tax brackets are increasing
- The brackets are increasing by 2.7%
- Meaning your overall tax should go down if no change to income
- That said, hopefully you make more and pay more but take home more
- Personal exemption also going higher – basic amount is up to $16,129 ($400 more)
So what does this mean? Frankly not a whole lot. Overall, you will be paying less income tax but more into CPP
Capital gains taxes
Breaking news – Canada has just announced that the capital gain inclusion rate changes will not come into effect until January 1, 2026.
Individuals:
- No changes on the first $250,000 (threshold)
- First $250,000 being taxed at a 50% inclusion rate
- Capital gains in excess are taxed with a 2/3 inclusion rate
Businesses:
- There is no initial threshold of $250,000
- Meaning all capital gains are being taxed with a 2/3 inclusion rate
- Example: $100,000 capital gains will have $66,667 being taxed
It’s not as bad for individuals. These changes are mainly aimed at individuals with substantial capital gains. Most Canadians, who typically have less than $250,000 in capital gains annually, won’t be affected by the increased rate.
Although this change has been announced, there is a possibility that a new government ends the measure. Here is a link to the recent announcement to delay the policy:
Other changes:
- The Lifetime Capital Gains Exemption is now $1.25M
- Donation contributions can be claimed up the Feb 28/2025 for 2024
- Canada Child Benefit is increasing
- Medical Expense threshold is now $2,833 of 3% of your net income
- OAS repayment threshold is now $90,997
- Here is a good link on CRA which has some other topics that you may be interested in: https://www.canada.ca/en/revenue-agency/news/newsroom/tax-tips/tax-tips-2025.html
If you need more information or assistance with understanding these changes, chat with us!